Development Cooperation Handbook/Definitions/Aid effectiveness

Definitions In February 2005, international community came together at the Paris High Level Forum on Aid Effectiveness, hosted by the French government and organised by the OECD. The role of aid in promoting development was attracting increasing public scrutiny in the run-up to the G8 Summit in Gleneagles, Scotland, and the global campaigns such as Make Poverty History.

While some progress had been made in harmonising the work of the different international aid donors in developing countries, it was acknowledged that much more needed to be done. The aid process was still too strongly led by donor priorities and administered through donor channels, making it hard for developing countries to take the lead. Aid was still too uncoordinated, unpredictable and un-transparent. Deeper reform was felt to be essential if aid was to demonstrate its true potential in the effort to overcome poverty.

At the Paris meeting, more than 100 signatories—from donor and developing-country governments, multilateral donor agencies, regional development banks and international agencies—endorsed the Paris Declaration on Aid Effectiveness. The Paris Declaration went much further than previous agreements; it represented a broader consensus among the international community about how to make aid more effective. At its heart was the commitment to help developing-country governments formulate and implement their own national development plans, according to their own national priorities, using, wherever possible, their own planning and implementation systems.

The Paris Declaration contains 56 partnership commitments aimed at improving the effectiveness of aid. It lays out 12 indicators to provide a measurable and evidence-based way to track progress, and sets targets for 11 of the indicators to be met by 2010.

The Declaration is focused on five mutually reinforcing principles:

• Ownership: Developing countries must lead their own development policies and strategies, and manage their own development work on the ground. This is essential if aid is to contribute to truly sustainable development. Donors must support developing countries in building up their capacity to exercise this kind of leadership by strengthening local expertise, institutions and management systems. The target set by the Paris Declaration is for three-quarters of developing countries to have their own national development strategies by 2010.

• Alignment: Donors must line up their aid firmly behind the priorities outlined in developing countries’ national development strategies. Wherever possible, they must use local institutions and procedures for managing aid in order to build sustainable structures. In Paris, donors committed to make more use of developing countries’ procedures for public financial management, accounting, auditing, procurement and monitoring. Where these systems are not strong enough to manage aid effectively, donors promised to help strengthen them. They also promised to improve the predictability of aid, to halve the amount of aid that is not disbursed in the year for which it is scheduled, and to continue to “untie” their aid from any obligation that it be spent on donor-country goods and services.

• Harmonisation: Donors must coordinate their development work better amongst themselves to avoid duplication and high transaction costs for poor countries. In the Paris Declaration, they committed to coordinate better at the country level to ease the strain on recipient governments, for example by reducing the large numbers of duplicative field missions. They agreed on a target of providing two-thirds of all their aid via so-called “programme-based approaches” by 2010. This means aid is pooled in support of a particular strategy led by a recipient country—a national health plan for example—rather than fragmented into multiple individual projects.

• Managing for results: All parties in the aid relationship must place more focus on the end result of aid, the tangible difference it makes in poor people’s lives. They must develop better tools and systems to measure this impact. The target set by the Paris Declaration is for a one-third reduction by 2010 in the proportion of developing countries without solid performance assessment frameworks to measure the impact of aid.

• Mutual accountability: Donors and developing countries must account more transparently to each other for their use of aid funds, and to their citizens and parliaments for the impact of their aid. The Paris Declaration says all countries must have procedures in place by 2010 to report back openly on their development results.

A first round of monitoring of the 12 Paris Declaration indicators was conducted in 2006 based on activities undertaken in 2005 in 34 countries. A second survey was organised in early 2008 in which 54 developing countries examined progress against the targets at country level. This 2008 Survey covers more than half all the official development assistance delivered in 2007—nearly USD 45 billion. The evidence so far suggests that progress has been made. For example, more than one third of developing countries surveyed had improved their systems for managing public funds; almost 90% of donor countries had untied their aid; and technical cooperation is more in line with developing countries’ own development programmes. Despite these improvements, however, the results of the Survey show that the pace of progress remains too slow to reach the targets set in 2010. In particular, although many countries have made significant efforts to strengthen their national systems (for instance by improving how they manage their public funds), in many cases donors are still reluctant to use them. The predictability of aid flows also remains low (with just over a third of aid disbursed on schedule), thereby making it hard—or impossible—for governments to plan ahead. In summary, whilst some progress has been made there are still many areas where the pace of change must be accelerated if the targets set for 2010 are to be reached. In addition to the data from the monitoring survey a useful way of understanding donor and recipient country performance is to examine donor and recipient country self-assessments, donor evaluations and Development Assistance Committee Peer Reviews.

In some quarters, the Paris Declaration is almost synonymous with aid effectiveness; it is expected that aid will be effective and achieve development outcomes when the principles are observed for government sector aid. However, there continue to be criticisms and alternative views, particularly from non-government aid organisations. Implementation of the Paris Declaration still needs to be significantly stepped up, according to the results of the 2008 Monitoring Survey. Concrete targets set for 2010 (such as an increased proportion of aid to be untied; establishment of "mutual accountability" mechanisms in aid recipient countries; and for two-thirds of aid to be delivered in the context of so-called programme approaches rather than projects) may be difficult to meet. Independent NGOs, such as Eurodad, also release their own evaluations, showing that the Declaration is not being implemented as planned. The Overseas Development Institute has specified that better monitoring of the relationship between the Paris Principles and development results at sector level is necessary.